Having just gone through another transaction with all kinds of lending pitfalls, I thought it would be good to get it out there how important it is to use a local lender when purchasing a property here in Hawaii.
Just because a mainland bank is licensed in Hawaii, doesn’t mean they are “capable”
There are lots of lenders on the mainland that are licensed in Hawaii, however, the majority of them are not doing loans here every day. Over the course of the past year, I’ve done 3 transactions with Buyers where they used a large mainland bank (all 3 are publicly traded). Only 1 of the 3 transactions went smoothly. I won’t mention the names of the banks here, however, here are 3 reasons why you should use a local lender when purchasing property in Hawaii:
1. Mainland lenders don’t do business here every day and don’t know the “ins and outs” of our Purchase Contracts, our condominium laws, CPR’s, co-ops, condotels, leasehold property, oceanfront property, and other things found unique to Hawaiii.
I once had a client that was a developer from California. He also owned his own mortgage company and wanted to buy an oceanfront co-op at Diamond Head. I recommended he go with a local bank and he didn’t take my advise (initially). He said his mortgage company is licensed in Hawaii and also can do co-op loans.
Needless to say, several weeks into the deal he found out that his company could not lend on co-ops in Hawaii. We were fortunate in that circumstance where the Seller was patient with us and let us extend our transaction. We switched to a local lender and it was smooth sailing thereafter. This is not always the case as you’ll see in my next reason below.
2. Mainland lenders can ultimately cost you more $ out of pocket. Although some mainland lenders may offer a decent rate on paper, a Buyer should consider several other factors. One of which is not getting your offer accepted. Most listing (Seller’s) agents have also had bad experiences in the past with mainland lenders and the likelihood of them taking another offer in a bidding war situation increases.
Another situation can be if the mainland lender doesn’t meet their deadlines, the Seller may opt to bump the Buyer out of contract. The third and most scary scenario (which I’ve experienced twice over the past year) is when the Seller then holds the Buyer’s feet to the fire and charges them penalties.
In both of those deals I advised my client to go with a local lender. Unfortunately, they were adamant about using their mainland bank. The good news is both loans ultimately closed, however, each of them ended up incurring thousands of dollars in penalties and had to pay for the Seller’s mortgage, maintenance fees, and taxes just to hold the deals together.
The money out of pocket is one (significant) thing, however, I didn’t even mention the stress and tension among the Buyer, Seller, their agents, and others involved in the transaction. All of which could have been avoided if they went with a local lender here in Hawaii.
3. The loyalty the Buyer has to their mainland bank is not reciprocated. Often times Buyers want to be loyal to their mainland because “that’s who they bank with.” Although generous in thought, that mainland bank does not have the client’s best interest in mind. Local lenders have to earn the trust and loyalty with their borrowers every transaction as it’s their reputation on the line for future business and referrals.
The mainland banks know someone is moving to (or purchasing a property) in Hawaii and knows it’s a one time deal. If they mess up, word won’t get around in say California that a lender messed up a loan in Hawaii. We only hear about it here and not there. There is no incentive for the mainland banks to do a good job and meet their deadlines.
Lenders here in Hawaii not only have to earn the trust and respect of the Buyers, they also have to earn the respect of our local Sellers and agents to have the confidence a deal will go through with the least amount of hurdles and stress.
Local lenders know local property
Want to Know More?
Here in Hawaii, we have a lot of great local lenders. Don’t just take my word for it. Feel free to ask any Realtor out there any of the following questions:
- Would you recommend I use a lender in Hawaii, or my bank on the mainland?
- If you received 2 offers on your listing, one from a local bank and the other mainland, which would you choose?
- Have you had any bad experience with mainland lenders?
I’d make a bet that all the answers would jive with what I’ve recommended earlier. Feel free to visit the lending information section of our website to learn more and discover additional reasons why it’s important to use a local lender.